LNG

Dominion Energy, a shareholder in the Cove Point LNG export plant in Maryland supplying Asia and Europe, has closed the sale of Questar Pipelines to Southwest Gas Holdings Inc. in a transaction valued at almost $2 billion, including the assumption of $430M of existing debt.

Dominion Energy, the US utility and former operator of the Cove Point LNG export plant in Maryland, has agreed to terminate the planned sale of Questar Pipelines to the Warren Buffet company Berkshire Hathaway Energy.

Dominion Energy, the US utility and owner of the Cove Point LNG export plant in Maryland, expects its transaction with Berkshire Hathaway Energy to close around November 1, 2020 when control of the liquefaction facility on Chesapeake Bay will pass to the company owned by billionaire investor Warren Buffett. 

“As consideration for that transaction, Dominion Energy will receive approximately $2.7 billion in cash and transfer $5.3 billion of existing Dominion Energy Gas Holdings related indebtedness to the buyer at closing,” said Dominion in a statement.

Dominion Energy expects to complete another part of the sale, involving Questar Pipelines, Berkshire Hathaway Energy upon receipt of anti-trust clearance on in early 2021. 

As consideration for that transaction, Dominion would receive around $1.3 billion in cash and transfer around $430M of existing Questar Pipelines indebtedness to Berkshire Hathaway.

Aggregate cash consideration and assumption of debt across the two anticipated closings is exactly equivalent to the original transaction terms announced on July 5, 2020.

“This mutually agreed dual-phase closing is the result of updated timing expectations for receipt of the HSR clearance from the Federal Trade Commission related exclusively to the sale of Questar Pipeline and Overthrust Pipeline (together with related entities Questar Pipelines),” explained Dominion.

“Given all closing conditions have been met with respect to non-Questar Pipelines assets included in the transaction, Dominion Energy and Berkshire Hathaway Energy have opted to move forward with an expeditious initial closing to be followed with a subsequent Questar Pipelines closing in early 2021,” it added, Richmond, Virginia-based Dominion.

As a result of the phased closing, Questar Pipelines and its associated debt will be removed from Dominion Energy Gas Holdings prior to the transfer to Berkshire. 

Dominion, whose utility business has 7 million customers in 20 US states, said it still expected to have a strong end-of-year performance with operating earnings per share, normalized for weather, to be in the top half of its $3.37 to $3.60 guidance range. 

Cove Point produces around 5.2 million tonnes per annum from a single Train and has tolling agreements with Gas Authority of India and Sumitomo Corp and Tokyo Gas of Japan.

The July 2020 deal between Dominion and Berkshire Hathaway was valued at $9.7 billion and included gas transmission and gas storage assets as well as the Cove Point stake.

The Buffett company said it was acquiring Cove Point plant as it was one of only six LNG export facilities in the US.

Business tycoon and philanthropist at the same time, Buffett was concluding his first big acquisition since 2015 and it happened to be in the natural gas and LNG business.

Buffett is considered one of the most successful global investors and has a net worth of $89Bln, making him the fourth-wealthiest person in the world.

Earlier in 2020, Buffett made a move for an LNG and pipeline natural gas project in Canada.

However, at the last minute he pulled out of the $6.7Bln LNG project deal in Quebec over concerns about infrastructure challenges.

While Berkshire Hathaway will control Cove Point LNG and be the operator, another 25 percent of the liquefaction and export plant is already owned by Brookfield Asset Management of Canada under a deal finalized in October 2019.

As part of the transaction, Berkshire Hathaway also acquires 100 percent of Dominion Energy Transmission, Carolina Gas Transmission and 50 percent of Iroquois Gas Transmission System.

After the November closing of the transaction Dominion will retain a 50 percent passive stake in Cove Point.